Taiwan's Green Energy Transition Under

Taiwan’s Green Energy Transition Under Way

Justin Chou, John A. Mathews

Abstract: The main elements in Taiwan’s already shown signs of a sharp reduction, down green power shift are reviewed, with focus on from 400 TWh in 2015 to 300 TWh in 2016, and developments since the election of the DPP anticipated further reductions to zero by 2025 government in early 2016 and its commitment as no new starts are to be allowed. But debate to phase out nuclear power in Taiwan by 2025. over the possible future of nuclear power in The drivers of the shift are identified,Taiwan continues, and the power outage in concentrating on solar PV power and the August (the ‘815 incident’) has prompted calls potential for offshore wind power. Like other for the restart of nuclear reactors that have countries in East Asia similarly pursuing a been shuttered. green shift, Taiwan is as much concerned with the business and export prospects for green The DPP government has pursued a strong industry as with reducing carbon emissions. commitment to raising the contribution of The argument is developed that furthergreen sources (meaning: power sourced from progress in Taiwan is linked to liberalization of water, wind and sun) to electric power the electric power sector, creating genuine generation. In proportional terms the competition for the quasi-monopoly, TaiPower. contribution from WWS sources has risen from 4.8% in 2015 to 6.6% in 2016 (including 1.5% Keywords: Taiwan; renewable power; anti- of pumped hydro storage), with a target of 20% nuclear; WWS (water, wind and sun); smart to be reached by 2025, i.e. over the next eight grid; electric power liberalization years. Excluding nuclear, this is planned to come largely from a strong expansion of the Since the election of the DPP government led solar PV sector, being raised from a capacity of by Tsai Ing-wen, in Jan 2016, the goal of an 1.3 GW in 2016 to 20 GW by 2025. Over the energy transformation in Taiwan has been same period wind power is to be raised in pursued vigorously. The most significant capacity from 755 MW to 4200 MW (4.2 GW). element of the shift is the phasing out of But again complexities in approvals processes nuclear power, guided by the oft-repeated mean that progress in actually installing the policy of achieving a nuclear-free homeland by new capacity for solar PV and wind power is 2025. But politics is never easy, and a major slow. It was a welcome development when a power outage in August, lasting for five hours, new offshore wind farm, the Formosa1 project, and caused by malfunction of a gas supply saw turbines installed and delivering power to valve in a gas-fuelled power generator,the grid. Taiwan has attracted support from prompted widespread debate andforeign renewable energy companies, notably recriminations. Both the Minister for Economic the Danish energy giant DONG Energy as Affairs (Lee Chih-kung) and the Chairman of partner in the new Formosa1 wind farm the gas supply company CPC Corp. (Chen Chin- project. te) resigned in order to take symbolic responsibility for the disastrous incident. The DPP government has an energy security policy commitment which focuses on natural Nuclear-powered electricity generation has gas as interim bridging fuel while nuclear is

1 15 | 21 | 5 APJ | JF wound back and renewables are wound up – nuclear power and fossil fuels, in a bid to more or less as in the case of Germany’s energy promote green entrepreneurial initiatives and transformation (Energiewende) program. The innovation in the power sector. contribution of coal is to be wound back, with its proportional contribution being lowered Taiwan thus presents a fascinating case of the from 45% down to 30% of electricity generated global green shift that is underway, where the by 2025, while gas is seen as the bridging commitment to move to a green power system power source and is projected to peak at 50% is reinforced by a political shift to the DPP, and of power generation by 2025. the government is taking every possible The arresting feature of Taiwan’s green shift is measure to strengthen its green shift with that it is part of a comprehensive industrial supportive industrial strategy aimed at building strategy that sees new industries andinnovative green industries for the future. In innovation as the driver of the next phase of this sense Taiwan is pursuing a renewable Taiwan’s industrial development. The present energy strategy that is common across East government’s strategy has morphed into what Asia – in China, Japan, Korea as well as Taiwan. is called the ‘5+2’ industrial innovation plan. To borrow the phrase used by DeWit in relation The aim is to shift Taiwan’s industrial base, to Japan, this may be termed a strategy of which is still very strong in manufacturing building ‘energy resilience’.2 industry, away from traditional reliance on contract manufacturing and focus instead on Clean energy targets: Green shift in higher value-added service and green oriented electric power generation business models. President Tsai’s election campaign in late 2015 had as one of its central The situation in terms of electric power elements the anticipated promotion of ‘Five generation in Taiwan in 2016 is shown in Fig. 1 Pillar Industries’ to drive growth in the future – – the situation at the start of the country’s the Internet of Things (IoT) (also known as the ‘Asian Silicon Valley’ project), biomedical green shift. The legacy of thermal power industries, green energy, smart machinery and (burning fossil fuels) and nuclear is clearly defence. Since the election of the DPPstrong. Total power generation in 2016 government in January 2016 the focus has amounted to 2257 TWh (or billion kWh), with broadened to encompass two new concepts, 37% coming from coal and 36% from gas. The namely a ‘new agricultural paradigm’ and the changes in Taiwan’s electric power generation, ‘circular economy’ so that the project became and anticipated changes in capacity, are shown known as the ‘5+2’ industrial strategy. It has in Figs. 2 and 3. and Table 1. Fig. 2 depicts the since broadened even further to encompass the history of the changes in power sources and digital economy and cultural innovation – but Fig. 3 the new renewable energy targets for the name ‘5+2’ remains. Taiwan is distinctive 2025 (i.e. in 8 years’ time), in the proportions amongst industrial powers in its clear as anticipated and in the amounts generated, conception of linking green energy and wider assuming only marginal growth in electric economy goals with industrial development power generation overall due to efficiency strategy. improvements and direct solar power Meanwhile there are moves to further liberalize generation. Taiwan’s electric power market, reducing the monopoly control of Taiwan Power Co.Figure 1. Taiwan’s electricity generation, (TaiPower) with its legacy commitments to 2016 Source: Based on data from TaiPower

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Source: Based on data from TaiPower

Figure 3 depicts the anticipated proportions in 2025, and probable actual generation levels, Figure 2. Changing electricity sources in based on what we assume to be total Taiwan, 1950-2016 Source: Based on generation in that year of 2400 TWh. This is Taiwan Power Company historical data, re- plausible if consumption growth is constrained organized by Justin Chou by energy efficiency measures and growth in direct solar photovoltaic (PV) generation.

Figure 3. Changing sources for electric power generation in Taiwan, 1950-2016

Source: Based on Taiwan Power Company historical data, re-organized by Justin Chou

Table 1. Renewable energy capacity expansion target, by Taiwan Bureau of Energy In October 2016 the Taiwan government (Executive Yuan) issued short-term targets for solar PV growth and again in June 2017 for wind power. The solar PV program is to be phased out over two years, raising solar PV capacity to 1.5 GW. Measures are to be taken

3 15 | 21 | 5 APJ | JF to release land needed for the development of Energy Policy, the Executive Yuan of Taiwan solar PV farms, including rooftops in public has taken decisive action in short term and buildings owned by the central government, long term strategy designed to achieve a non- factories, farms and agricultural production nuclear homeland by 2025.5 This has included facilities, land used by the salt industry, aquatic stabilizing thermal power supply with better areas such as reservoirs, irrigation ponds, fish efficiency, adopting demand respond (DR) and farms (collectively known locally asprice differentiation on electricity, and planned ‘floatovoltaics’) and landfills. The program will reductions in energy consumption levels. In the also be addressing planning and regulatory medium - term, natural gas power generator controls that are inhibiting rapid shift to solar will play the role of bridging fuel and will be PV power.3 In addition to the national policy expected to peak at 50% of power generation. goals there is strong promotion of renewables Overall renewable energy sources are at municipal level, particularly by Taipei, anticipated to reach 20% of the power Tainan, Kaohsiung and Taoyuan localgeneration by 2025. To achieve this goal, smart jurisdictions. grid and metering have to be implemented and large energy storage solution such as more Wind power is to be promoted under a four- hydro pump is required. year plan that aims at enhancing domestic demand and taking a balanced approach to By having a goal of strengthening the industry both onshore wind and offshore wind power. of Taiwan, MOEA aims to increase the The target is to reach an extra capacity of 3 GW manufacturing GDP share of green energy and offshore wind power and 1.2 GW in onshore emergent technology to 30% of total (land-based) capacity, making 4.2 GW of wind manufacturing in Taiwan by 20206, which was power over the period 2017 to 2020, and only 4% in 2008. The Taiwanese government calling for investment of NT$610 billionaims to export its green energy total solution (US$19.2 billion). In keeping with the tradition worldwide to boost economic growth by first of formulating pragmatic industrial policies in setting up large demonstration sites and Taiwan, the offshore wind power program is to creating a domestic market before seeking to be supported with promotion of special purpose penetrate foreign markets. piers and industrial zones in ports, by fleets of construction ships for building the offshore The green shift in Taiwan is being pursued wind turbines, better grid connections via across a number of fronts. Let us review submarine cables and landing points, as well as progress made in the following sectors: harmonizing of offshore power regulations, manufacturing of solar cells; the Shalun standards and third-party certification.4 greentech industrial park; green transport; smart grid promotion and liberalization of the These programs are designed to connect with electric power sector. programs that go back to those of previous governments including the ‘Thousand wind Manufacture of solar PV cells turbines and million solar roofs’ project, under which feed-in tariffs are offered to promote Taiwan has been a strong contender in household adoption of solar PV rooftop power. manufacturing solar PV cells, and great efforts have been expended to generate a local value The green shift industrial strategy chain encompassing production of silicon and other components needed to produce solar PV As noted above, Taiwan is distinctive in modules. Yet as in other manufacturing pursuing a green shift that is underpinned by a activities, the Taiwan model of low-cost strong industrial policy. According to the New manufacturing (frequently without branding,

4 15 | 21 | 5 APJ | JF through contract manufacturing) has prevailed.

Taiwan had risen to second largest solar PV manufacturing country by 2008/9, when it overtook both Japan and Germany as a producer – through the efforts of companies such as Gintech, Motech, NeoSolarPower (NSP). Indeed, three companies – NeoSolar, Gintech and SolarTech – announced a merger in late 2017, to consolidate manufacturing in Taiwan. And there is diversification along the value chain: Motech recently announced its plan to build a 400MW solar farm in the south tip of Taiwan with PingTung county government, thus indicating a significant move Source: JC, based on data from IEA PVPS for the company from manufacture to power 7 generation.

The situation in global solar PV cellShalun Green Energy Park manufacturing up to 2015 is depicted in Fig. 4. As the 2nd largest PV cell manufacturing A green energy technology park has been nation, Taiwan has been facing pricelaunched in the south of the island, with a competition with China and USA's anti-ceremony marking its inauguration being dumping duty (ADs). Although the cell capacity staged at the end of 2016. Now the Shalun is about 15% of the world market, Taiwan's Green Energy Technology Park (or Science module capacity only takes 2%, indicating that City) is advancing, with vigorous promotion by 8 domestic PV installation demand is still weak. the Tainan mayor. (This is a feature of the A new strategy led by DPP government with a DPP’s ‘5+2’ innovation program, which goal of 20GW PV installation by 2025 is features collaboration on each facet of the considered as antidote to increase domestic program between the central government demand and create value-added products. administration and local cities.) The Shalun Taiwanese PV manufacturing is leaving the park is intended to promote a cluster of green price competition game with China (which rose industries spearheading green energy to global dominance over the years 2005 to development, with key ministries designated as 2010) and moving towards higher efficiency PV the Ministry of Economic Affairs (MoEA) and cell production. the Ministry of Science and Technology (MoST). A dedicated green energy research Figure 4. Global manufacturing of solar PV institute is to be established. The park is being cells, 1995 to 2015 Source: JC, based on laid out on a site spanning 23 hectares, located data from IEA PVPS next to the Tainan high-speed rail station, thus linking it to the capital Taipei and the Hsinchu Science Park.

Green transport

In transport, electric vehicles and particularly two-wheeled vehicles (scooters and electric

5 15 | 21 | 5 APJ | JF bicycles?) are making great strides, stimulated notably Korea, Japan and China. All these by successive government programs of tax countries are promoting the smart grid as both exemptions. The Taiwan government through a means of facilitating the input of fluctuating the MoEA adopted a Smart EV Development sources of renewable power, and as a means of Strategy and Action Plan, offering subsidies building export platforms for the future. China and incentives particularly a five-yearis doing so perhaps most robustly of all, exemption from the Commodity Tax for EV because the necessity to create energy security purchases, covering small passenger cars, is so keenly felt as a political imperative. Japan motorcycles, taxis and buses available in is pursuing smart grid initiatives in the name of Taiwan. This program builds on an earlier tax national energy resilience, while Korea has exemption policy introduced in January 2011, been pursuing such initiatives under the rubric then extended a second time to January 2021. of ‘green growth’ and most recently as a The Plan envisages extra sales of electric cars ‘creative economy’ initiative. But progress in of 5,939 units, while sales of electric motor- Taiwan is widely viewed as being linked to scooters are anticipated to increase byliberalization of the electric power market, to 150,000. While some Tesla components are reduce the quasi-monopoly control of TaiPower. supplied from Taiwan, the tax exemption Liberalization of Taiwan electric power program also benefits Tesla suppliers by market boosting green energy manufacturing GDP in Taiwan. With investment from NationalThe heavily regulated monopoly of power Development Fund, now new start-ups like generation and distribution maintained by Taipei-based Gogoro are leading the way. Taiwan Power Co. (TaiPower) with its legacy of Gogoro is famous in Taiwan for its smart, commitment to nuclear power and fossil fuels, stylish scooters, which have captured 8.3% of has long been viewed as an obstacle to any the market in Taiwan, and more than 10% in green energy shift in Taiwan. Now there is Taipei itself – according to an article published some movement towards liberalization under 9 by the Hong Kong Trade Development Council. way. In January 2017 the Taiwan legislature passed amendments to the Electricity Act, that Promotion of the smart grid regulates the power grid monopolized by TaiPower, allowing independent green power Deployment of smart electricity consumption producers to sell their power direct to meters for households is expected to be rolled consumers, and not just to TaiPower. The rates out from 2017, with a first round of 200,000 at which such sales can be effected were stated meters to be installed within two years and a in the feed-in tariffs that are promulgated from total of three million to be installed by 2026 – time to time. These changes to the law are now thereby making the grid fit for coping with on the point of being put into practice. ‘Power fluctuating power sources and facilitating distributors will be able to start applying for demand-response energy conservation and permits to transmit and distribute power from efficiency improvement programs. These renewable energy suppliers to customers at the measures will facilitate the policy goal in end of next month at the earliest,’ a Bureau of Taiwan of integrating measures taken to Energy official Lee Chih-yuan told the Taipei improve energy generation, energy storage and Times at the ministry in September.10 energy conservation. Greening of agriculture and the circular There are clear parallels betweeneconomy developments in Taiwan and those in other East Asian countries pursuing a green shift, To demonstrate the broad appeal of greening

6 15 | 21 | 5 APJ | JF strategies, Taiwan is also playing a lead role in desulphurizing slag, a project completed in developing new green approaches to enclosed 2015 at a cost of NT$ 2 billion (US$64.5 systems of agriculture (‘new agricultural million). CSC also shares energy resources – paradigm’) and the development of a circular steam, heat and power – with other companies economy to reduce waste generation and in the Linhai park. improve resource efficiency. Many of the agricultural initiatives were displayed at the Paper: Cheng Loong Corp. (CLC), a leading first Asia AgriTech Expo & Forum staged in producer of packaging paper, states that 94% Taipei in September 2017, where vegetable of the 1.69 million tonnes of raw material it growing in enclosed systems, usinguses each year is recycled paper. The company hydroponics and LED lighting, wereuses the recycled paper in producing, e.g. shoe demonstrating clean, green urban foodboxes for Nike. Other circular flow initiatives production. One of the companies exhibiting include using sludge from papermaking to feed was Tatung, with its ‘Smart Farms’ range of the steam power cogeneration system (along food production systems. with other fuels) and recovering fly and bottom ash from its papermaking operations to be Incoming President Tsai Ing-wen announced in onsold to cement producers. her inaugural address in 2016 that ‘We will Tyres: Taiwan has as much as 120,000 tonnes bring Taiwan into an age of circular economy, of used tyres to be put away each year. The turning waste into renewable resources’. This simplest ways are typically by burning or put to is a welcome move where Taiwan can learn landfill. One company, Enrestec Ltd, invented a lessons from both Japan’s and China’s decade- pyrolysis process that can thermally decompose long commitment to improve its resource tyre chips to useful materials such as pyrolysis efficiency via circular economy initiatives.11 oil, flammable gas, steel wire, and high grade Some specific industrial ecological initiatives carbon black from used tyres for reuse in new taken by companies include the following. tyre making and printer cartridge, while the Jia Qian Rubber Tech Corp. transforms used tyres Semiconductors and electronic waste: Taiwan into rubber mats for playgrounds.12 Semiconductor Manufacturing Co. (TSMC), the world’s largest semiconductor contract Concluding remarks manufacturer that is based in Taiwan, currently recycles 15% of its waste materials – and has Taiwan’s green shift is now clearly getting published plans to raise this level to 61% by under way, driven by a strong commitment by 2020. Often the manufacturing processthe incoming DPP government to a fresh requires so much water, TSMC is already industrial strategy with a focus on green turning waste sulfuric acid into electronics- energy and a greening more generally of the grade acid and recycles water for 3.5 times economy. But problems in terms of moving use. quickly to implement the medium-term solar and wind power goals, and upgrade the grid to Steel: Taiwan’s leading steel producer, China enhance stability, resilience and to Steel Corp. (CSC), produces 5.6 million tonnes accommodate fluctuating power sources, are of waste products per year (e.g. blast furnace still clearly evident. slag and waste refractory materials), and the company is increasingly re-using these as raw Despite a strong will led by DPP government to materials at its Linhai industrial park or pursue the development of green energy supplying them to other firms. One project economy, through green governance, the involves recovering iron by recyclingenergy transformation is backed by a powerful

7 15 | 21 | 5 APJ | JF coalition of Taiwanese citizens. There is indeed Miners Will Need 2.3 Million New Jobs a strong popular green movement in Taiwan, by 2020: Cutbacks in Mines and this is what drives the anti-nuclear John Mathews and Hao Tan, China’s decisions of the DPP government and the new Continuing Shift in the Electric Power emphasis on shifting to green power systems. Industry: Evidence from 2016 data The short-term economic constraint from John Mathews and Hao Tan, China’s New increasing electricity price and unstable grid Silk Road: Will it contribute to export of service will require more advocacy, public the black fossil-fueled economy? support, and passion from local citizens so the Sung-young Kim and John A. Mathews, progress of heading a green (circular) economy Korea’s Greening Strategy: the role of is continuously achievable. smart microgrids Andrew DeWit, Japan’s Bid to Become a The next phase in the green shift will likely be World Leader in Renewable Energy felt across several sectors, encompassing green John A. Mathews and Hao Tan,The power and energy storage, as well as transport Greening of China's Black Electric Power (electric vehicles and fuel cell vehicles), System? Insights from 2014 Data industry and agriculture. After a slow start, John A. Mathews and Hao Tan, “China’s Taiwan is now beginning to close the gap with Continuing Renewable Energy the world’s leaders in the green shift, including Revolution: Global Implications” China and Germany. John A. Mathews and Hao Tan, “Jousting with James Hansen: China building a Acknowledgment: Our thanks to Ms Carol renewables powerhouse” Huang for assistance in preparing the graphics. John A. Mathews, The Asian Super Grid Andrew DeWit, Japan’s Energy Policy at Related articles a Crossroads: A Renewable Energy Future? John A. Mathews, China’s Electric Power: Sun-Jin YUN, Myung-Rae Cho and David Results for first Half 2017 demonstrate von Hippel, The Current Status of Green continued green shift Growth in Korea: Energy and Urban Feng Hao and Stam Lee, Chinese Coal Security

Justin Chou is a doctoral candidate in the Institute of Technology Management at National Tsing Hua University in Taiwan, and currently also a consultant for fuel cell technology, assisting early technology adopters to realize future energy solutions (i.e. fuel cell and electromobility). His current research work is focused on Technological Innovation Systems of fuel cell and renewable energy technologies. He holds a B.Sc. in chemical engineering from Queen's University and M.S. in material science and engineering from National Tsing Hua University. He can be reached at [email protected].

John A. Mathews is Professor Emeritus in the Macquarie Business School, Macquarie University, Sydney. He was Professor of Strategy for many years at Macquarie Graduate School of Management, Sydney, and concurrently the Eni Chair of Competitive Dynamics and Global Strategy at LUISS Guido Carli University in Rome. His research focuses on the competitive dynamics of international business, the evolution of technologies and their

8 15 | 21 | 5 APJ | JF strategic management, and the rise of new high technology industries. His work has centered in recent years on the emergence of the ‘green economy’ and the transition to renewable energies, and the institutional changes needed to provide industrial capitalism with long-term sustainability. He is the author of Strategizing, Disequilibrium, and Profit, Global Green Shift: When Ceres Meets Gaia published by Anthem Press and Greening of Capitalism: How Asia is Driving the Next Great Transformation published by Stanford University Press.

Notes

1 See John Mathew’s contribution to this topic, with Mei-Chih Hu, via ‘Taiwan’s green shift: Prospects and challenges’, Asia Pacific Journal, Oct 1 2016 2 See Andrew DeWit, ‘Japan’s “National Resilience” and the Legacy of 3/11’ Asia Pacific Journal: Japan Focus, March 15, 2016, Vol. 14, Issue 6, No. 1 3 See Executive Yuan, ‘Two-year solar power promotion plan’, 22 September 2016 4 See Executive Yuan, ‘Four-year wind power promotion plan to create clean energy’, 9 June 2017 5 See here (in Chinese). 6 See here (in Chinese). 7 See here (in Chinese). 8 The value chain for solar photovoltaics (PV) runs from silicon ingot to solar cell production to module assembly and then installation on rooftop or other insulated locations. The focus of manufacture in Taiwan has been on cell production rather than module production. 9 See ‘Taiwan looks for pioneering role in Electric Vehicle development’, by Tammy Hsieh, HKTDC Research, 7 Feb 2017 10 See ‘Applications to “green” energy suppliers to open’, Taipei Times, 19 September 2017 11 See the article in Nature by JM and Hao Tan, ‘Circular Economy: Lessons from China’, Nature, March 2016 12 These examples come from ‘Greening the economy’ by William Kazer, Taiwan Today, May 1 2017